Using less, paying less

Our view: A new approach to energy efficiency is needed that delivers savings for less

September 7, 2008

It's unlikely that officials with Baltimore Gas and Electric Co. expected the Maryland Public Service Commission to reject most of the company's energy-efficiency programs. After all, what the utility had proposed - the customary package of consumer incentives and rebates - reflects what's been done in the past and continues to take place elsewhere.

But the PSC move last month was right if for no other reason then simple cost-effectiveness. Traditional approaches such as offering rebates to buyers who use Energy Star appliances are unduly expensive (though potentially lucrative to the utility) and too often reward people for decisions they would have made anyway.

The sharp rise in electricity rates has made it all the more absurd. If the cost of a compact fluorescent lightbulb is recovered by the consumer in a matter of months thanks to lower utility bills, why discount the bulbs or spend extra money on marketing modest rebates? The incentive is already there.

By BGE's own accounting, the utility wanted to charge ratepayers $274 million to pay for energy-efficiency programs over the next seven years that would have returned only slightly more than half of that amount, $144 million, in the form of incentives. The other $130 million would have gone to administration, marketing and labor.

Make no mistake, Maryland needs to promote energy efficiency. And there are any number of promising programs to accomplish this, such as BGE's pilot project with smart meters that allows consumers to buy electricity at lower prices when demand is down.

The state faces a potential power shortage in several years unless a variety of steps are taken from building new interstate transmission lines to fostering additional power generation. Fostering conservation is as critical as any of those efforts.

In rejecting BGE's proposals, the PSC doesn't offer much in the way of alternatives. That's unfortunate. And it's noteworthy that one of the PSC's last attempts at cost-effectiveness- a plan that had a Western Maryland utility deliver compact fluorescent lightbulbs to customers whether they wanted them or not - caused an uproar.

But with rising utility rates, cost-effectiveness does matter. The last thing consumers need is to pay more each month to underwrite well-intentioned but high-overhead programs that don't deliver enough bang for the buck.